17th May 2014
A new entrant to the crowdfunding market is providing finance to landlords and allowing savers to invest their money into buy-to-let without the hassle of owning a property.
Peer-to-peer platform Landbay aims to marry up buy-to-letters who need to access loans for property purchases and savers who want to supply the funds.
Savers can lend from £100 for a fixed term of three years through the platform, which auctions off money in three risk bands – A+, B and C . Lenders can choose which band to invest in depending on how much risk they want to take and how much return they want.
The A+ band offers total protection as lenders are paid back first in the event of the borrower defaulting and a subsequent property sale, they are also covered by Landbay’s protection fund. Bands B and C are not covered by the protection fund and receive money owed after A+ lenders have been paid. Depending on which band is chosen, interest rates can vary between 3.5% and 10%.
John Goodall, chief executive of Landbay, said the platform would be an opportunity for savers, frustrated at poor returns, to invest in ‘low risk returns’ at above inflation.
‘Landbay…will open the door to a much broader cross-section of the public to the attractive returns available from investment in Britain’s residential buy-to-let market, a sector that was worth £21 billion in new lending last year alone.’
He added that Landbay was ‘democratising investment’ in the buy-to-let sector for those who would not otherwise be able to afford, or who do not want the hassle, of owning another property.
As the properties are found by landlords, Landbay vets them twice with two sets of valuations to ensure they are worth lending against. Property is also subject to affordability calculations that ensure a minimum rental coverage of 125% of the loan repayments is met.
For those who wish to borrow through Landbay, interest rates are in-line with those being offered by buy-to-let mortgages although the five-year loan term is far shorter and borrowers are expected to refinance, either with Landbay or a more traditional lender, after this time or sooner if they want.
Landlords, whether professionals or first-timers, can borrow between £50,000 and £500,000. The loans can be obtained through specialist mortgage broker Mortgages for Business.
Mortgage applications are subject to extensive fraud & credit checks as well as affordability checks. Landbay has an in-depth 2 step valuation process. The properties are subject to an in-depth inspection by an independent RICS surveyor and this valuation report is then peer reviewed by a leading property consultancy.
Any money loaned through Landbay is not covered by the Financial Services Compensation Scheme.